Archive for the ‘Superannuation’ Category

The ATO has started issuing excess transfer balance (ETB) tax assessments to self managed super fund (SMSF) members, or their agents, who had previously received an ETB determination and rectified the excess. These ETB tax assessments are sent to SMSF members (or their professionals), and not to the fund. It’s then up to the member to decide how to cover the ETB liability for exceeding their $1.6 million pension transfer balance cap.
The ATO warns that SMSF members may receive an ETB assessment even if they didn’t receive an ETB determination. If they rectified the excess before they were assessed for a determination, they are still liable for the ETB tax. However, SMSF members who were covered by the transitional rules for excesses not exceeding $100,000 and rectified in full by 31 December 2017, will not receive an ETB tax assessment.

The Banking Royal Commission has wrapped up its two weeks of hearings focused on financial advice.
The hearings have included gruelling evidence of misconduct in financial services entities’ provision of financial advice, occurring in the context of fees being charged for no service, platform fees, inappropriate advice, improper conduct and the disciplinary regime.
The Royal Commission has adjourned until 21 May 2018, when it will begin its third round of hearings with a focus on small and medium enterprises (SMEs). The Commission’s final report is due by 1 February 2019.

Minister for Revenue and Financial Services Kelly O’Dwyer has announced the authorisation of the new financial dispute resolution scheme, the Australian Financial Complaints Authority (AFCA), which will start accepting complaints from 1 November 2018. AFCA is intended to be a “one-stop shop”, having the expertise to deal with all financial disputes, including superannuation and small business lending disputes, with higher monetary limits and compensation caps.
All Australian financial services (AFS) licensees, Australian credit licensees, superannuation trustees and other financial firms legally required to join AFCA will need to do so by 21 September 2018.

In welcome news for superannuation members, the government has announced plans to simplify the payment of transition to retirement income streams (TRISs) so that they will always be permitted to automatically revert to a dependant upon the death of the original pensioner. This is designed to address a trap in the current legislation that is causing some administrative difficulties for funds when a TRIS recipient passes away.
TIP: With greater certainty about the payment of TRISs on death, now is a good time for superannuation members to review their estate plans.

The ATO has advised that is now sending out excess transfer balance (ETB) determinations to individuals who have exceeded their superannuation transfer balance cap and not taken steps to remove the excess amount.
TIP: The transfer balance cap, currently set at $1.6 million, is a limit on the total amount of super that can be transferred into retirement phase. You can make multiple transfers as long as the total amount transferred remains below the cap.
Self managed superannuation fund (SMSF) members that had exceeded their transfer balance cap by $100,000 or less on 1 July 2017 had until 31 December 2017 to remove the excess capital from retirement phase. If they didn’t do so, they will now have to remove the excess capital and ETB earnings, and also pay ETB tax.

The Department of Social Services (DSS) has released its proposed means testing rules for pooled lifetime retirement income streams.
The pension standards were amended from 1 July 2017 to allow for more tax-exempt lifetime superannuation income stream products that enable pooling risk to manage longevity risk. Lifetime pensions and annuities that meet these new standards qualify for tax concessions tax treatment.
The DSS proposes to consider the following amounts when assessing such pooled lifetime income streams as part of social security means testing:
• income test: 70% of all income paid from the income stream product; and
• assets test: 70% of the purchase price of the product until the person reaches the age of their life expectancy at the time they made the purchase, and 35% from then on.
TIP: Under the new rules, deferred super income stream products would receive the same asset test assessment as products where payments begin immediately.

The ATO has released further guidance on when SMSFs need to report events affecting their members’ transfer balance accounts (by making a transfer balance account report, or TBAR) for the purposes of the $1.6 million pension cap.
From 1 July 2018, SMSFs that have any members with a total superannuation balance of $1 million or more must report events impacting that member’s transfer balance account within 28 days after the end of the quarter in which the event occurs.
SMSFs where all members have total super balances of less than $1 million can choose to report events which impact their members’ transfer balances at the same time that the fund lodges its annual return.
The guidance also covers reporting requirements for retirement phase income streams and commutations (including commutation authorities).

The Government has released a consultation paper and exposure draft legislation to give effect to the following superannuation taxation integrity measures it announced in the 2017–2018 Federal Budget:
• the non-arm’s length income (NALI) rules in s 295-550 of the Income Tax Assessment Act 1997 for related-party superannuation fund transactions will be expanded from 1 July 2018 to also include expenses not incurred that would normally be expected to apply in a commercial arm’s length transaction (eg reduced interest expenses, brokerage, accountancy fees or legal costs); and
• a member’s share of the outstanding balance of a limited recourse borrowing arrangement (LRBA) will be included in the member’s “total superannuation balance” for new LRBAs entered into on or after 1 July 2018.
The measures are designed to ensure that related-party transactions with super funds and LRBAs can’t be used to circumvent the reduced contribution caps that apply from 1 July 2017. The changes should generally not affect LRBAs entered into with unrelated third parties for commercial rates of interest (and other expenses).

The ATO has become aware that its guidelines on Everett assignments and the allocation of profits within professional firms are being misinterpreted for some higher-risk arrangements, including the use of related-party financing and self managed superannuation funds (SMSFs).
The guidelines have been suspended from 14 December 2017 to allow the ATO to consult with stakeholders on replacement guidelines.
Anyone considering new arrangements beginning after the cut-off date should contact the ATO to discuss the arrangement risk profile and the possibility of a private ruling.
Arrangements beginning before the cut-off date that comply with the guidelines and do not exhibit high risk factors shouldn’t require action, but arrangements with high risk factors may be subject to ATO review.
TIP: The ATO encourages anyone who is uncertain about how the law applies to their existing circumstances “to engage with us as soon as possible”.

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The ATO has started issuing excess transfer balance (ETB) tax assessments to self managed super fund (SMSF) members, or their agents, who had previously received an ETB determination and rectified the excess. These ETB tax assessments are sent to SMSF members (or their professionals), and not to the fund. It’s then up to the member [...]